This has left many potential borrowers with questions about what loan options might be available to them, as well as how best they can manage their credit scores to ensure they meet the criteria necessary for an FHA loan.
In response to this situation, a reader asked if recent late payments would disqualify them from an FHA loan compared to other types of mortgages. In order to provide clarity on this topic, it is important to have a clear understanding of the criteria for approval for an FHA loan.
The first consideration for this type of loan is that all applicants must possess a valid social security number and have an established history of employment. As a result, applicants must provide proof of employment and income prior to the application process.
In terms of credit, an FHA loan requires at least a 580-credit score. This score requirement can be somewhat daunting for some borrowers who have experienced recent delinquencies on their credit report. The good news is that FHA lenders grant some flexibility depending on the nature of the delinquency.
For example, if the delinquency is due to job loss or a medical emergency, it will likely not have a greater impact than a delinquency due to frivolous spending or overspending. In addition, the FHA also allows lenders to review a borrower’s entire credit report and to make an individual decision based on the individual circumstances. This provides potential borrowers with the opportunity to demonstrate their creditworthiness and to receive an approval despite having a few late payments within the past year.
Under FHA guidelines, any late payments within the past 12 months must be documented and must also be included in the loan application. Furthermore, borrowers must provide a letter of explanation to document the cause of the late payment. If the cause is deemed to be “acceptable” by the lender, they may still approve the loan application, provided that there is sufficient documentation to back up the borrower’s claim.
In summary, it is possible to get an FHA loan even if a borrower has a few late payments within the last year, however the details behind those payments must be examined carefully. An FHA loan requires a minimum credit score of 580, so any borrower who does have a few late payments must take steps to improve their credit score and prove their ability to make timely payments in order to be considered for approval.
This article covers the reader’s question of whether it is possible to obtain an FHA loan if the borrower has a few late payments in their credit history. The article explains that an FHA loan requires a minimum credit score of 580, but that there is some flexibility depending on the circumstances surrounding the late payments. The article goes on to explain that late payments must be documented and accompanied by an explanation, and that the lender has the right to make an individual decision based on the borrower’s credit report and the explanation provided. While it is possible to obtain an FHA loan after having a few recent late payments, the borrower must take steps to improve their credit score and demonstrate their ability to make timely payments in order to increase their odds of being approved.
This article was contributed on Nov 29, 2023
